|The petroleum industry plays a key role in the Egyptian economy. It is one of four main sources of foreign exchange with Egypt being currently an oil exporter. Egyptian oil production comes from four main areas: the Gulf of Suez, the Western Desert, the Eastern Desert, and the Sinai Peninsula. In addition to its role as an oil exporter, Egypt has strategic importance because of its operation of the Suez Canal and Sumed (Suez-Mediterranean) Pipeline. These are two routes for export of Persian Gulf oil. The Sumed pipeline is an alternative to the Suez Canal for transporting oil from the Persian Gulf region to the Mediterranean. The 200-mile pipeline runs from Ain Sukhna on the Gulf of Suez to Sidi Kerir on the Mediterranean.
The first oilfield in Egypt was discovered in 1869 and it came into production in 1910. At this time, Anglo-Egyptian Oilfields (a joint venture between BP and Shell) was the major operator in the area and continued exploration and development until it was nationalized in 1964. In 1962, the Egyptian General Petroleum Corporation (EGPC) was formed and became the major operator in the form of joint ventures with foreign companies. In 2000, the Ministry of Petroleum, headed by H.E. Eng. Sameh Fahmy (Minister of Petroleum in Egypt) took promising measures to face-lift the petroleum sector in Egypt. This was marked by a complete restructuring of the industry and the separation between natural gas and petrochemicals activities and those of the Egyptian General Petroleum Corporation (EGPC). The reformation resulted in the establishment of EGAS, ECHEM and GANOPE, creating a new structure of the petroleum industry in Egypt. This restructuring releases EGPC from its gas and petrochemical activities and allows it to focus more on the oil sector.
At the beginning of 2007, the Shura Council’s Industrial and Energy Committee approved nine agreements for oil and natural gas prospecting in the areas of the Gulf of Suez and the Western and Eastern Deserts. The amount of investments for these agreements account for approximately $222.65 million, said Shamel Hamdy, the First Under-Secretary of the Ministry of Petroleum. One of the major contracts sealed during the first half of 2007 is the WTR- Gulf of Suez Petroleum Company (GUPCO) deal. Through this two-year contract, Aberdeen-based WTR is to provide the materials and the installation of cold repair for leak fixation in the areas of the Gulf of Suez, the Western Desert, Port Said, Dashour and Ras Bakr, where GUPCO owns production rights along with its partners BP and EGPC. In the framework of the ministry’s strategy to expand the usages of natural gas in all the Egyptian governorates, the Arab International Bank (AIB) sealed a loan agreement with the Egyptian Natural Gas Holding Company (EGAS) in order to finance the installation of two gas supply lines from Taba to Sharm El Sheikh and Shokair to Hurghada with a total value of LE 355 million and $90 million (LE 512 million). This loan agreement is provided by a consortium of eight banks which include the AIB; Societe Arabe Internationale de Banque, Egyptian Saudi Finance Bank, Piraeus Bank, United Bank of Egypt, National Bank for Development, the National Bank of Abu Dhabi, and the Audi Bank. The main target of this project is to supply six million housing units over the next six years with natural gas with LE 30 billion total investment. This is not the sole contribution of banks in projects related to the oil and gas sector.
The Ministry of Petroleum (MoP) exerted enduring efforts to bring into play the area of Upper Egypt and its attempt to benefit from its concealed reserves. Dana Gas is one of the leading corporations that have served the ministry’s strategy. Through a farm out agreement, the Middle East’s first regional private-sector natural gas company and Kuwait International Oil & Environment Company (KIOEC), a subsidiary of TAQA Holding and Gulf Oil Investments are to partner Dana’s Komombo Concession, situated in Upper Egypt, 800 km south of Cairo. Dana already conducted technical evaluation of the concession, including “the interpretation of geological and geophysical data and the acquisition of 516 Km’s of 2-D seismic,” announced the company in a statement. This technical evaluation led to the identification of drillable prospects and four addition leads. The new partners are to share the drilling works which were scheduled to begin in mid 2007.
The year 2007 also witnessed the revival of gold in the sector. “Egypt revives its Gold fortune…” was one of the key strategies and quotes adopted by the MoP, which is to resume the program of gold mining after a halt of more than 50 years. As a debut, Fahmy signed a memorandum of understanding with the International Finance Corporation (IFC), the private arm of the World Bank, to replace the old mining laws that contributed to the lack of local investments in general and foreign investments in particular.
|Structure of the petroleum industry in Egypt
|Egyptian General Petroleum Corporation (EGPC)
EGPC was established by the Egyptian government in 1962 and is considered the first economic corporation established in the petroleum industry in Egypt. It is active in the upstream, downstream and petrochemical sectors, has full responsibility for all sectors of the Egyptian petroleum industry and holds the sole right to import and export crude oil and other petroleum products. As a controller of the industry, any foreign investments in Egypt are maintained through a joint venture with the EGPC and are supervised by the government. Among the major activities of the EGPC are petroleum agreements, exploration, production, transportation and refining.
Egyptian Natural Gas Holding Company (EGAS)
Recognizing the increasing importance of natural gas, the Egyptian government created EGAS in August 2001. The purpose of existence of EGAS is to manage foreign investment in exploration and the use of LNG (Liquefied Natural Gas) tankers, production
Egyptian Petrochemicals Holding Company (ECHEM)
ECHEM is a holding company assigned to manage and market Egypt’s emerging petrochemical industry. It is a major corporation in Egypt established in 2002, with a mission of developing a competitive petrochemicals industry based on the use advanced technology. ECHEM promotes investment, facilitates the development of new projects owns and is continuing to establish production plants. ECHEM has a 20-years plan to develop the petrochemical industry based on natural gas reserves of Egypt, which form the backbone of the petrochemical industry.
Ganoub El Wadi Petroleum Holding Company (GANOPE)
GANOPE, previously known as the South Valley Development Company (SVDC), was established in January 2003 to promote development activities specifically in Upper Egypt (Sohag, Aswan, Assyout, Qena, AL Wadi El-Gedied), which represent over half of Egypt’s total area. GANOPE is the chief corporation assigned by the Egyptian government for handling and assessing all petroleum activities in the south area of Egypt.
Foreign Companies and Egyptian Private Sector Companies
In addition to the holding companies (EGPC, EGAS, ECHEM and GANOPE), there are foreign companies and Egyptian private sector companies operating the Egyptian petroleum sector. These companies are granted concession areas for exploration purposes in accordance with the periodic bidding rounds administered by the relevant holding company. There are over 50 international companies that operate in the exploration, excavation and production of oil and gas in Egypt.
|There are many potential investment opportunities in the Egyptian oil, gas and petrochemicals industry. Below are the areas in which there are investment opportunities:
|Reasons to Invest in OG
|Egypt has been very successful in attracting foreign investment and arranging fruitful partnerships with major international oil and gas companies. The success of these partnerships has been due to the continuous support of the Egyptian Government and has been enhanced by many reasons that make Egypt’s energy industry a desirable location for investment. These reasons include:
|Starting from the year 2000 Egypt has gone into a series of reforms related to it is economy and foreign strategy. These reforms are aimed at giving opportunities for foreign investors to enter the Egyptian market. Due to the importance of the petroleum sector for the Egyptian economy, a number of reforms were made to ensure its efficiency. Reforms in the sector include implementation of new laws, a reduction in price controls and an opening of the distribution sector to private investment. Among the laws and regulations related to the petroleum sector in Egypt are:
A law substituting the law 230 of 1989:
Law 8 of Investment:
Oil & gas concessions laws and regulations:
Oil & gas concessions financial regulations:
Other advantages granted to petroleum projects are:
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